Personal Currencies: New Ways to Look at Money

On Saturday, I wrote about my transition from spender to saver. I mentioned that I'd recently peeked at the latest camera equipment. “I spent twenty minutes on Amazon, drooling over the Nikon D300,” I wrote. “I'm tempted — but not much. I'd rather save that $1,800 for the future.”

This is an excellent way to look at proposed expenses: re-frame the purchase in terms of something you already value. I've already spent several months coveting a Mini Cooper. By looking at the new camera in terms of how much Mini it would cost me — 6%! — I get a better idea of the sacrifice I'd have to make to buy it. It makes the idea more concrete. In a way, the Mini Cooper has become a sort of personal currency.

Money is an abstract concept. It really represents time and labor, and those are hard to visualize. By finding something concrete to use as a measure of value instead, it's easier to visualize how much something is really worth to you.

For example, my wife sometimes measures things in lattés. If she sees something in a store, she'll stop and consider: “That vase is three lattes” or “Those shoes are ten lattés” or “That book is two lattés”. By looking at things in this way, she's able to figure out how much they're actually worth.

Our friend Marla measures things in Saturns. She loves her car (a Saturn, naturally), and so whenever somebody mentions something expensive, she's able to compute its value to her. A fancy plasma TV might be one-fifth of a Saturn, for example. A house might be ten or twenty Saturns.

Last night at dinner, I mentioned this notion to our friends Mike and Rhonda. “Oh, we used to do that all the time,” Rhonda said. “When we were first married, we lived near a sushi place. We loved their rainbow rolls, but they were kind of expensive. Whenever we got paid, we'd convert the dollars to rainbow rolls.”

Obviously these sort of personal currencies aren't sophisticated financial tools. They are, however, quick and easy ways for each of us to measure the relative value of the things we buy.

In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.

The concept is interesting, but I think that if I measured things in latte’s I’d end up buying them, since I’d think “and it’s easy to give up a few lattes…” I think this is similar to the “cost-per-use” idea, which sometimes saves me and sometimes doesn’t. It’s easy to say, “no, I’m not spending X on a dress that I’ll wear once or twice to go to someone’s wedding” and it’s just as easy to say “of course it’s worth it, I’m sure I’ll wear those shoes at least once a week for a year, and then the cost-per-wearing… Read more »

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kick_push

12 years ago

here’s one.. that $1,800 for the nikon is worth 7 to 8 months of gas! crazy ain’t it

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Chris

12 years ago

This rings so true for me.

My currency has evolved – I used to measure money in hours of minimum wage, six-packs of beer and videogames. Now, my currency is tanks of gas, months of rent and the downpayment I hope to put on a car.

Although sometimes, I must admit, I still measure things on the Wii/Xbox 360 game scale. Old habits die hard I guess.

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Laura

12 years ago

I think this is a common thing for people to do. It’s like that commercial for McDonald’s (or some fast food place – I think it was McDonald’s) where the people were measuring other items by how many $1 items they could get at McDonald’s. LOL

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ryan

12 years ago

my dad (small business owner) always measured things in car payments. if he sold something and got $400 for it, he would say “that’s two months of a free car” and then figure out how to pay for the next two months after that. i do not roll on that level yet, so i always equate things to my cell phone. When i have a chance to make $50, i see it as a free phone for a month. when i have investments that cover my phone, i move on to something else, until everything is paid for. thats the… Read more »

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Red

12 years ago

I might start thinking in Mini Coopers as well. That Mini Clubman is just hot!

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A.J.

12 years ago

I look at calories from food in terms of Krispy Kreme glazed doughnuts.

i.e. “That Chipotle burrito is 7 glazed doughnuts.”

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Sam

12 years ago

I like this idea! I also use the cost per use method (mostly for clothing purchases). The more I read and think about money/spending the more I find that for me money and spending is more emotional or psychological than numbers.

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KC

12 years ago

I always think of currency in those ways. Like today I had to buy some allergy medicine and had a $3 off coupon. I thought “$3 off – hey that’s a hot dog at the baseball game!!” (I’m a big baseball fan and have season tickets to my minor lg team in case your wondering). When I figured my taxes and saw I was due a return I thought – “That’s 1/5th a Roth contribution!”. But as for this mini Cooper… I got behind one today and its very small and thin. Are you sure this is safe? Is it… Read more »

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Matt Hubbard

12 years ago

It’s a brilliant idea. For a while we measured things in Crab Cakes. Then it became Days of sailing in the Virgin Islands. Now it’s fractions of a fridge. (We are adding a kitchen) Personally, I’ve been looking at new video games as 1/16 of a new Xbox.

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peter xyz

12 years ago

If you travel overseas (especially across multiple currency zones in one trip) you’ll quickly find yourself doing this a lot. Just converting back into dollars won’t do the trick since different countries are more or less expensive to start with – so at some point you need to compare the price someone is trying tocharge you for a taxi trip to what your dinner cost last nigth – it really gets you thinking about currencies and value.

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KF

12 years ago

It would be hard for me to see it as a percentage of a Mini because to me my new Cooper S convertible is priceless. I love it.

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Ben

12 years ago

I did this with my cable bill. At $60/month I realized I could buy between 3-12 dvds that I could keep and watch forever. Or I can go to 30 movies (there is a $2 theater across the street) every month.

I ended up dropping cable, freeing up that money and only watching a few more movies each month. So I took the leftover money and put it toward a gym membership that is helping me get in shape.

For me, 3-4 movies + better health is a far greater value than cable.

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Mike

12 years ago

Sometimes this strategy backfires. When I was first moving in with my then-girlfriend-now-wife, I was in grad school in the early 1990s. I was attempting to furnish an apartment on a grad school budget so I was hitting yard sales hard. I found an incredibly ratty sleeper sofa that was marked at $50 but was then marked down to $25, $20, then $15. The young ladies selling the sofa see me checking it out. I’m suspicious of it, doing my typical “I’m sort of interested but you’ll have to try harder” stance that’s saved me tons of money over the… Read more »

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JosephG

12 years ago

I measure things in retirement. Spending $50 celebrating Cinco de Mayo is like $750 in retirement dollars.

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The Tim

12 years ago

Heh, I used to do that a lot, back before I bought my recent pair of video game systems (the Wii & 360). I reduced the value of everything to my favorite unit: “Xboxes”

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CRM

12 years ago

My mom tried to use a similar approach for me when I got my first job at Dairy Queen. When I wanted to buy something, she’d remind me of how many hours I had to work making sundaes to earn the money to pay for it.

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Ken

12 years ago

Reminds me of a Wendy’s commercial that used to air not too long ago. Three young guys were sitting in a board room across from some exec who offered them something like $1 mil, and one of the young guys says to the other “Wow, thats like over 300 Jr. Bacon Cheeseburgers a piece!”

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B Smith at Wealth and Wisdom

12 years ago

JD-I like translating it into my most valuable resource-time. This is the only resource that I have no control over as there are only 24 hours in a day.

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David

12 years ago

I always measure things in paychecks that is 1/3 of my paycheck or that will take 2 Paychecks.

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Mike

12 years ago

I do the same thing. For example, if I see a DVD I want to buy, I compare how much it costs to how many hours I would have to work to pay for it. Is it really worth working 2 hours for a DVD? The answer is usually no, so I will pass.

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pdxwoman

12 years ago

Ouch! JosephG, your take on it actually made me grimace! That approach just might work for me. I usually figure cost based on time it took to earn that money, but there’s nothing quite like thinking I’ll be losing $750 at retirement if I spend $50 today.

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Jenny

12 years ago

I totally do this! My fiance and I are renovating our house and also planning a wedding and everytime we think about huge unnecessary (to us) wedding costs I think “Wow, for the price of that cake we could buy a sofa” for “No, I don’t want a dj, photographer, florist … I want hardwood flooring.” This technique helps us keep it all in perspective.

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Ben

12 years ago

I agree with the comment from Chris in relating everything to hourly wage. I calculated my after tax salary down to per hour, and I consider if the purchase is worth one hour, one day, or a week of work. Usually not.

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Avlor

12 years ago

I do this quite often and have a couple “personal currencies”. One is the price of my house (often use this when drooling over new cars and the cost freaks me out enough to continue being happy with my clunker that I’ll drive ’till it’s dead.) The other is cameras and accessories – great way to help save for my photographic obsession (err I mean hobby).

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Ryan

12 years ago

I’m with JosephG – I think about the things I’m buying in terms of the expected return on my money through retirement. Since I’m still young, I expect a 15x multiplier on the contributions I’m currently making, which makes it tougher to justify that $3 stop at QT in the morning when I know it’s $45 that will be missing when it comes time to retire…

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Debbie M

12 years ago

I first saw this sort of thing in an Edward Abbey book: one of the characters measured things in six-packs. (He may have been measuring time rather than money, though: time spent on road trips, where others were doing the driving. I don’t remember.) I used to think in terms of boxes of macaroni and cheese, back when I could get four for a dollar. Most things cost the same as quite a lot of boxes of macaroni and cheese. Nowadays, I don’t do this so much. The things I want (renovation, retirement) are so expensive that calculating in those… Read more »

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Philip

12 years ago

One worry I would have on setting it to the cost of a mini cooper or other highly valuable item is that small things would appear to have such small effects.

Take a $4 latte, to compare with your cooper, using same values that is only .00013 of a Mini Cooper, so what does that matter.

Also, I have heard many times using the Big Mac currency, I have seen it quite a few times as economic valuation.

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Kym

12 years ago

I used to measure things in beanie babies, when I was a collector. Now I measure things in Chipotle burritos – which is basically the same as they’re both about $6 😀

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Kate

12 years ago

This method worked particularly well at the taste of Chicago a few years ago. Everything is purchased by tickets and tickets were some odd ball amount like $0.67 that was hard to add fast in your head. So once we realized a budweiser was 6 tickets or something, we measured everything in buds. Is that hot dog expensive? It’s one and a half buds. That pizza? Two budweisers. Much easier and faster to make a decision than to try $0.67 x 7 in your head.

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Dave Farquhar

12 years ago

The strategy works with small expenses too, you just need to pick something other than a Mini Cooper to compare to. Here’s a strategy that’s very similar to the one that worked for me. You like books, music or movies? That $4 latte is anywhere from 25%-40% of a book, CD, or DVD on your want list, right? Cut out the lattes, buy the stuff on your want list with the savings, and once your want list is empty, don’t pick the habit back up. I found there were all kinds of nickel-and-dime things I was wasting money on with… Read more »

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El Cheapo

12 years ago

My personal currency for bigger purchases is ‘Hours of Overtime Pay’… In other words, I tell myself that I’m going to have to work [X] extra hours to pay for this thing… More times than not, it deters me from purchasing!!

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Defessa

12 years ago

This is something my husband and I used with our kids. We used Pizza as the conversion unit. As they got older, we changed the units into something else meaningful.

It really hit home when we heard the kids talking about how many pizzas a trip to Disney might cost.

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Chris

12 years ago

When my wife and I were planning to buy a flat screen TV (for around $400) we would frame everything in terms of that. “We could buy a flat screen TV for that amount of money”. We saved probably several times the value of the TV by saying saying that and thinking we were saving for the TV. Also, since we don’t yet have kids, but are planning to in the near future, I have also framed things to my wife in terms of college tuition. Assuming something like 20 years before we have to pay for college and assuming… Read more »

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slackbob

12 years ago

I do the same thing with an after-tax work hour as my baseline. It works well with small purchases (eating out for lunch is 6/7th hours of work) but gets depressing on groceries trips (8 HOURS this past trip!) and other necessities that I cant get around.

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Jennifer

12 years ago

I do this all the time, except for money I am saving, not something I want to spend money on. Coupons seem like little bits of money, but they add up quickly. Just a few coupons used on my weekly trip will equal a gallon of milk for free, or more. Yesterday I used $18.10 in coupons, so that is oh maybe 5 gallons of gas (1/2 a tank in my dh’s car), or 5 gallons of milk. It makes me realize that clipping and sorting the coupons is totally worth it to me in the end.

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Frugal Dad

12 years ago

I frequently use “hours worked” as my own form of personal currency, as in it takes 2 hours of work to pay for a new Wii game (before taxes, of course). When I convert the cost of something from arbitrary paper currency and into something tangible, like how many hours of labor it requires to pay for something, it helps me differentiate needs and wants. I’m less likely to forfeit over several hours of work for something I simply “want.”

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Ian McKellar

12 years ago

I guess I like to travel, based on the way I measure things. After flying from San Francisco (where I live) to Europe to visit my extended family for $600 I started measuring things in trips to Europe. An iPod when they first came out, almost as expensive as a trip to Europe! No Way! Now my wife and I are saving up to travel for a year. We’ll spend a lot of that time in developing countries. A hundred dollars is probably a week on a beach somewhere in Africa or South East Asia including food, drink and accomodation.… Read more »

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SP

12 years ago

I just wrote about this last week or so. In high school, I used to measure things in price of clothes (how embarrassing!) then on my semester abroad, I measured it in price of travels.

I moved into this country many years ago, and to this day, I convert a lot of things into my native country’s currency, and think, (this could feed a whole lot of people back in XXXXX). I’ve even stood in line at SBUX, then thought about this, then exit the line before my turn. I guess a lot of people who grew up elsewhere do this too.

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Chris

12 years ago

As a high school student, I was always a little stingy, but now that I have a part time job it’s easy to equate hours of work to money. $7 an hour, roughly, so a tank of gas for a small car is just an eight-hour day of work away… Likewise, a Playstation 3 is going to eat up around 60 hours, not including games, additional controllers, blu-ray movies, etc.

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Miranda

12 years ago

Thanks for this post! I’ve never really thought about it that way, but I do it too! When I lived in New York, I thought in terms of my favorite bagel with a smear. And when we were poor grad students, my husband and I measured things in terms of the cheap student take deal at the pizza place.

Now that I want to go back to Austria, I’m measuring things in terms of how many airline miles I’ll get for putting them on my rewards card…

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Matthew-L

12 years ago

For me purchases get related to tables I have to serve a night. ” this 5$ foot long = a table of 2-4 people that I have to completely dedicate the next hour of my life to their every need.” or my car payment = 2 days of running my butt off to make sure people can get as full as they possibly can off of soup and salad.. It also works inversely, when I’m at work I can keep myself going by reminding myself each table = 1-3 gallons of gas.

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SingleGuyMoney

12 years ago

I’ve never really thought about it like that but this is an absolutely fantastic idea. I want an Iphone so I will start measuring things against that..LOL

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Nottheangel

12 years ago

My husband and I talk about things in terms of how many hours of work that would be. If we want a new movie or a new bike, we calculate how much the price is worth in after-tax hours of work. It definitely puts things in perspective. If I think about the money I have in my accounts, I’ll be tempted to buy things I could wait to get. But when I think about it in terms of having to work two or three or four hours or more in order to have that same item or meal etc… well,… Read more »

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James

12 years ago

One summer I had no job, so twice a week I’d donate plasma. They took 900ml/visit and with two visits per week I’d pull in about $250/month. It was enough for the summer at my parents, but talk about the value of money… No CD is worth 900ml of my own flesh. Gas though, that was always a tough drive. Right from the donation to the pump – fluid in fluid out.

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Steffnee

12 years ago

My husband and I use a similar concept, and it has helped us become miserly very quickly. I am in business school and he works for an hourly wage. Everything in the store is converted into how much time it takes to earn that much money: “Would I do my job for half an hour to receive this item instead of money… would I work 4 days and 3 hours to be given this item?” Usually not.

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Paul

12 years ago

JD what about using the camera equipment you have to generate additional income to purchase your dream car.

I knew a friend of mine that would go to childrens games (soccor, baseball,etc) and take photos and post them on a website that the parents could purchase.

Just a thought…

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Dixie

12 years ago

This strategy can backfire though. My wife and I tend to measure things in terms of nights out on the town (Our favourite thing).

It’s easy to justify buying things, such as clothes etc, when you think that you’d spend that much on one night out. Thing is we usually still go for the night anyway.

We have a baby now so the cost of a night out has gone up a lot, making even more things seemingly affordable 🙁

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Josh

12 years ago

I often use the after-tax earnings method. But I include more than just federal income taxes.

If you make $20/hr, have a federal marginal income tax rate of 25%, a state income tax rate of 2.35%, and Social Security and Medicare are another 7.65%, then your after-tax income is 65% of your gross pay – or $20*65%=$13/hr.

While you may *think* something will take you 1 hour of work to purchase, it really takes 20-45%+ more work because of taxes.

I personally would also account for the rates I give and save. So, my net earnings rate would be even lower.

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